By GREG AITKENS
A required minimum distribution from one’s retirement account is the smallest amount an account holder must withdraw from employer-sponsored retirement plans each year. If individuals fail to meet the RMD, the amount not withdrawn will be taxed at 50 percent. These rules apply to all employer-sponsored retirement plans, such as: profit sharing, 401k plans, 403(b) plans, and 457(b) plans.
If account owners of one of these employer-sponsored programs have reached age 72 (or 73 if reached age 72 after December 31, 2022), they must take out the money to avoid the 50 percent tax. One way to avoid paying income tax on RMDs is to donate the amount directly to a qualified 501c3 organization–like the cambriaca. Retirees must ensure that these funds are transferred directly from the retirement custodian to the charity that is chosen. It cannot come from a retiree. Donations of up to $100,000 of a person’s RMD may be made to charities per year, as long as the donation happens before December 31.
My wife Ginny and I recently became old enough to take these RMDs and have selected a number of local charitable groups, including the cambriaca to donate to. We believe in what they are doing.
Donating portions of a RMD is a great way to save taxes, and to benefit the charitable groups you like. This is a great time of year to donate. For any questions, please contact me at: greg.r.aitkens@gmail.com.
(Greg is a retired Certified Financial Planner, who worked in Orange County for almost 40 years.)
